Alaris Royalty Corp. Releases First Quarter Financial Results

05/05/2009 09:00

CALGARY, ALBERTA--(Marketwire - May 5, 2009) - Alaris Royalty Corp. (TSX:AD) ("Alaris" or the "Corporation") today announced its results for the three months ended March 31, 2009.
Revenues for the three months ended March 31, 2009 were $4.60 million compared to $4.68 million in the prior year period - the decrease of 1.7% was due to the net impact of performance adjustments to the annual royalties. The Corporation recently announced annual distribution increases for LifeMark Health effective January 1, 2009 and for MEDIchair effective October 1, 2008 and a decrease to the annual distribution from LMS Reinforcing Steel Group effective January 1, 2009. The fourth Private Company Partner (as defined below) End of the Roll, has an annual reset date of May 1st coinciding with its fiscal year-end.
The Corporation recorded net income of $2.9 million and EBITDA of $3.6 million for the three months ended March 31, 2009, compared to $915,000 of net income and $4.4 million of EBITDA for the prior year period. The increase in net income is due to the restructuring in July 2008 that reduced debt by $83.5 million significantly reducing interest expenses. The decrease in EBITDA is attributed to both the increase in corporate expenses due to additional public company costs and non-cash stock based compensation expenses recorded in 2009 as a result of amortizing the fair value of corporate long-term incentive plans (Options and Restricted Share Units).
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Reconciliation of Net Income to 3 months ending 3 months ending
EBITDA (thousands) March 31, 2009 March 31, 2008
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Net Income (Loss) $ 2,896 $ 915
Adjustments to Net Income:
Amortization 58 58
Interest 575 3,384
Income tax expense 54 -
EBITDA $ 3,583 $ 4,357
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"We are pleased to be reporting a strong financial quarter that is in line with what we were expecting to deliver," said Steve King, President and CEO. "The results to date reflect the visibility we have of each of Alaris' revenue streams and the simplicity of our cost structure. We will continue to deliver results with low quarter-to-quarter volatility. Distributions from our Private Company Partners also represent less than two thirds of the earnings and cash flow being generated by these companies so we are confident in their ability to continue to meet their obligations to Alaris."
Outlook
Alaris' agreements with the private businesses to which it provides alternative financing (the "Private Company Partners" and individually "Private Company Partner") provide for payments estimated to provide the Corporation approximately $17.7 million of revenues for fiscal 2009. In each of the next three quarters the agreements call for $4.35 million of revenues for Alaris. The expectation of a marginal decline from the first quarter results (approximately 5%) is a result of the year over year decline in the distribution from LMS Reinforcing Steel Group - which is partially offset by increases in the other three partners. General and administrative expenses have increased as a direct result of public company costs and are estimated at $2.2 million annually. Alaris' senior debt facility is almost fully drawn to $25 million ($24.7 million drawn at March 31, 2009) and the interest rate on that debt was 5.50% at March 31, 2009 (subsequently reduced to 5.25% at April 30, 2009). $6.5 million of subordinated debt is also outstanding with an interest rate of 13%. Cash requirements after net income are expected to continue to be minimal.
"In times like these, predictability of revenue sources is vital to a company's success", said Mr. King. "The fact that we have contracts with four profitable private businesses that are required to provide Alaris with monthly revenues of $1.45 million for the rest of 2009 gives us confidence in our ability to pay regular monthly dividends to our shareholders". Alaris plans to continue to seek out new Private Company Partners accretive to the Corporation's earnings per share in the current Private Company Partners and other private businesses that meet Alaris' investment criteria.
The Consolidated Balance Sheet, Statement of Operations and Deficit and Statement of Cash Flows are attached to this news release. Alaris' financial statements and MD&A are available on SEDAR at www.sedar.com and on our website at www.alarisroyalty.com.
About the Corporation:
Alaris provides alternative financing to the Private Company Partners in exchange for royalties or distributions with the principal objective of generating stable and predictable cash flows for dividend payments to its shareholders. Royalties or distributions from the Private Company Partners are structured as a percentage of a "top line" financial performance measure such as gross margin and same-store sales and rank in priority to the owners' common equity position.
Non-GAAP Measures
The terms EBITDA and normalized EBITDA (collectively the "Non-GAAP Measures"), are financial measures used in this news release that are not standard measures under Canadian generally accepted accounting principles ("GAAP"). The Corporation's method of calculating Non-GAAP Measures may differ from the methods used by other issuers. Therefore, the Corporations Non-GAAP Measures may not be comparable to similar measures presented by other issuers.
EBITDA refers to net earnings (loss) determined in accordance with GAAP, before depreciation and amortization, net of gain or loss on disposal of capital assets, interest expense and income tax expense. EBITDA is used by management and many investors to determine the ability of an issuer to generate cash from operations. Management believes EBITDA is a useful supplemental measure from which to determine the Corporation's ability to generate cash available for debt service, working capital, capital expenditures, income taxes and dividends. The Corporation has provided a reconciliation of net income (loss) to EBITDA in this news release.
Normalized EBITDA refers to EBITDA excluding items that are non-recurring in nature. Items include expenses incurred in connection with the Acquisition and include non-cash stock option and other transaction related costs.
These Non-GAAP measures should only be used in conjunction with the Corporation's annual audited and quarterly reviewed financial statements, excerpts of which are available below, while complete versions are available on SEDAR at www.sedar.com.
Forward-Looking Statements
This news release contains forward-looking statements. Statements other than statements of historical fact contained in this news release are forward-looking statements, including, without limitation, management's expectations, intentions and beliefs concerning the growth, results of operations, performance and business prospects and opportunities of the Corporation and the Finance Group, the general economy, the amount and timing of the payment of dividends by the Corporation, the future financial position or results of the Corporation, business strategy, proposed acquisitions, growth opportunities, budgets, litigation, projected costs and plans and objectives of or involving the Corporation or the Finance Group. Many of these statements can be identified by looking for words such as "believe", "expects", "will", "intends", "projects", "anticipates", "estimates", "continues" or similar words or the negative thereof. In particular, this news release contains forward-looking statements regarding the anticipated financial and operating performance of the Finance Group in 2009 and the anticipated impact on the dividends and distributions to be received by the Corporation in 2010. In addition to the general factors outlined above, the forward-looking statements relating to LMS assume that LMS will benefit from the British Columbia provincial government's announcement of $14 billion of new infrastructure projects and higher priced inventory being installed in future construction projects, and the forward-looking statements relating to the other Finance Group Members assume that such Finance Group Members will continue to have favourable operating results.
There can be no assurance that the plans, intentions or expectations upon which these forward-looking statements are based will occur. Forward-looking statements are subject to risks, uncertainties and assumptions and should not be read as guarantees or assurances of future performance. The actual results of the Corporation and the Finance Group could materially differ from those anticipated in the forward-looking statements contained herein as a result of certain risk factors, including, but not limited to, the following: the dependence of Alaris on the Finance Group; reliance on key personnel; general economic conditions; failure to complete or realize the anticipated benefit of Alaris' financing arrangements with the Finance Group; limited diversification of Alaris' financing arrangements with the Finance Group; management of future growth; availability of future financing; competition; government regulations; leverage and restrictive covenants under credit facilities; the ability of a Finance Group Member to terminate the agreements pursuant to which Alaris has invested in such Finance Group Member; risk relating to the Finance Group and their businesses; unpredictability and potential volatility of the trading price of Common Shares; fluctuations of dividends; restrictions on the potential growth of Alaris as a consequence of the payment by Alaris of substantially all of its operating cash flow; income tax related risk; future sales of Common Shares by significant shareholders; ability to recover from a Finance Group Member for defaults under the agreements pursuant to which Alaris has invested in such Finance Group Member; conflicts of interest; dilution; and liquidity of Common Shares. Accordingly, readers are cautioned not to place undue reliance on any forward-looking information contained in this news release. Statements containing forward-looking information reflect management's current beliefs and assumptions based on information in its possession on the date of this news release. Although management believes that the expectations represented in such forward-looking statements are reasonable, there can be no assurance that such expectations will prove to be correct.
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ALARIS ROYALTY CORP.
Consolidated Balance Sheets, Unaudited
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March 31, December 31,
2009 2008
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Assets
Current assets:
Cash $ 1,741,120 $ 1,743,936
Accounts receivable 204,139 11,307
Prepaid expenses 10,400 35,417
Future income taxes (note 10) 3,349,476 3,649,476
Investment tax credit receivable (note 10) 150,798 150,798
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5,455,933 5,590,934
Investment tax credit receivable (note 10) 6,441,259 6,441,259
Future income taxes (note 10) 24,819,146 25,528,693
Equipment (note 4) 75,829 90,458
Investments (note 3):
Preferred LP units 98,124,642 98,124,642
Intangible assets 13,200,074 13,243,384
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111,324,716 111,368,026
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$ 148,116,883 $ 149,019,370
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Liabilities and Shareholders' Equity/(Deficit)
Current liabilities:
Accounts payable and accrued liabilities $ 735,853 $ 443,553
Dividends payable 638,829 1,094,620
Future income taxes (note 10) 42,932 42,932
Bank indebtedness 2,058,333 -
Subordinated debt (note 5) 6,500,000 6,500,000
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9,975,947 8,081,105
Bank indebtedness (note 5) 22,641,667 25,000,000
Future income taxes (note 10) 3,136,988 3,136,988
Deferred credit (note 10) 26,542,740 27,497,912
Shareholders' equity/(deficit):
Shareholder's capital (note 6) 98,330,164 98,278,747
Contributed surplus 661,188 264,472
Deficit (13,171,811) (13,239,854)
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85,819,541 85,303,365
Commitments (note 13)
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$ 148,116,883 $ 149,019,370
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ALARIS ROYALTY CORP.
Consolidated Statements of Operations and Deficit, Unaudited
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Three months Three months
ended ended
March 31, March 31,
2009 2008
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Revenues:
Royalties and distributions $ 4,598,615 $ 4,680,825
Interest and other 1,837 1,500
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4,600,452 4,682,325
Expenses:
Interest 575,479 3,383,815
Non-cash stock based compensation (note 8) 441,044 -
Salaries and benefits 212,911 237,086
Corporate and office 151,465 76,508
Legal and accounting fees 137,272 11,365
Stock based compensation (note 8) 73,341 -
Depreciation and amortization 57,938 58,380
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1,649,450 3,767,154
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Net Income before taxes 2,951,002 915,171
Future income tax expense (note 10) 54,375 -
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Net Income and other
comprehensive income for the period 2,896,627 915,171
Deficit, beginning of period (13,239,854) (2,542,839)
Distributions to unitholders (note 7) - (810,000)
Dividends to shareholders (note 7) (2,828,584) -
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Deficit, end of period $ (13,171,811) $ (2,437,668)
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Earnings per share, basic $ 0.32 $ 0.61
Earnings per share, fully diluted $ 0.30 $ 0.61
Weighted average shares outstanding, basic 9,124,004 1,500,010
Weighted average shares outstanding, fully
diluted 9,727,554 1,500,010
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ALARIS ROYALTY CORP.
Consolidated Statements of Cash Flows, Unaudited
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Three months Three months
ended ended
March 31, March 31,
2009 2008
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Cash provided by (used in):
Operations:
Net Income for the period $ 2,896,627 $ 915,171
Add non-cash items:
Depreciation and amortization 57,938 58,380
Stock based compensation (note 8) 441,044 -
Income tax expense 54,375 -
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3,449,984 973,551
Change in non-cash working capital 131,575 (548,542)
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3,581,559 425,009
Financing:
Distributions to unitholders - (810,000)
Dividends to shareholders (3,284,375) -
Repayment of debt (300,000) -
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(3,584,375) (810,000)
Increase/(decrease) in cash (2,816) (384,991)
Cash, beginning of period 1,743,936 1,599,339
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Cash, end of period $ 1,741,120 $ 1,214,348
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